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Tuesday December 18, 2018

Finances

Dave & Buster's Reports Earnings Beat

Dave & Buster's Entertainment, Inc. (PLAY) announced its third quarter earnings on Tuesday, December 5. The company reported increased revenue but missed analysts' estimates.

Dave & Buster's reported quarterly revenue of $250 million. This was up 9.3% from last year's third quarter revenue of $228.7 million, but fell short of the $255.4 million in revenue that analysts expected.

"Our team pulled through remarkably well in the face of unprecedented weather-related challenges in the quarter and difficult comparisons to last year," said Dave & Buster CEO Steve King. "We continue to believe that the primary growth driver for the business is opening new stores with great returns. Our 2016 class of stores is trending very well, with returns close to 50%, in line with the first year returns for our recent classes of stores."

Dave & Buster's announced net income of $12.2 million, or $0.29 per share, compared to $10.8 million or $0.25 per share a year ago. This beat Wall Street's earnings estimate of $0.23 per share.

The entertainment and dining company has opened seven new locations this year and announced on Tuesday that it will be opening 14 stores in fiscal 2018. Dave & Buster's currently has 84 locations in the U.S. and Canada. The company is changing its tactics, planning to open two locations in a small store format in 2018. The small store format will be a space of 15,000 to 20,000 square feet. In comparison, the typical Dave & Buster's locations required around 40,000 square feet of space.

Lululemon Shares Continues Earnings Streak

Lululemon Athletica Inc. (LULU) announced its third quarter earnings on Wednesday, December 6. The athletic wear company reported better-than-expected revenue and earnings. Shares jumped 6.43% in response to the report.

Lululemon reported quarterly revenue of $619.0 million. This was up 14% from last year's third quarter revenue of $544.4 million and surpassed the $610 million predicted by analysts.

"Our teams powerfully delivered robust results across both store and digital channels this quarter, driving a further acceleration in our business," said Lululemon CEO Laurent Potdevin. "As we start the holiday season, I'm energized by our momentum and we are increasing guidance to reflect this performance. I'm grateful for the enthusiasm I see every day across our collective as we remain on our path to delivering $4 billion in revenue in 2020."

Lululemon announced net income of $58.9 million, or $0.44 per share. Last year at this time, the net income was $68.3 million, or $0.50 per share.

The Canada-based company's stock has gained 16.8% during the past month of trading. This is the fourth consecutive earnings beat the company has experienced. Lululemon adjusted its fourth quarter outlook to reflect increased comparable sales. The company experienced an increase of 26% in its direct to consumer net revenue. Lululemon's men's line campaign, which was started after the company's second quarter 2017 report, has generated an increase of 21% in customer transactions in that demographic.

Lululemon Athletica Inc. (LULU) shares ended the week at $73.77, up 7.9% for the week.

Dollar General Reports Increased Earnings

Dollar General (DG) announced its quarterly earnings on Thursday, December 7. The discount retailer reported increased sales and profits.

The company reported revenue of $5.9 billion for the quarter. This is an increase of 11% from $5.3 billion during the same quarter last year and also above the $5.8 billion expected by analysts.

"We are pleased with our overall third quarter results, which include a strong same-store sales growth of 4.3% and increases in both average transaction amount and customer traffic over the 2016 third quarter," said Dollar General CEO Todd Vasos. "We remain excited about the future for Dollar General. For fiscal 2018, we have plans to execute approximately 2,000 real estate projects comprised of 900 new stores, 1,000 store remodels and 100 store relocations."

Net income for the quarter was $252.5 million, or $0.93 per share. This is up from $235.3 million, or $0.84 per share at this time last year.

The Tennessee-based chain of discount stores announced Thursday it will open 900 new stores in fiscal 2018. Dollar General has more than 14,000 locations nationwide, which reflects an expansion of 35% from just five years ago. Same store sales increased 4.3% year-over-year in the third quarter.

Dollar General (DG) shares ended the week at $89.04, up 4.9% for the week.

The Dow started the week of 12/4 at 24,424 and closed at 24,329 on 12/8. The S&P 500 started the week at 2,657 and closed at 2,651. The NASDAQ started the week at 6,897 and closed at 6,840.

Treasury Yields Mixed Results

Yields on U.S. Treasury bonds increased early in the week of Monday, December 4 following Senate passage of its version of tax reform. Economists expect that growth and inflation will follow the passage of tax reform.

The benchmark 10-year Treasury note started the week at 2.41% on Monday. Yields slipped as investors are unsure of how tax reform will impact the U.S. economy.

"This is a big step forward in passing the largest overhaul of the tax system in three decades, which will give the economy a moderate lift," said BMO Capital Markets Senior Economist Sal Guatieri. "The odds of passagelikely early next year though possibly soonerare now clearly better than even."

On Monday, the Commerce Department released a report showing that orders for U.S. manufactured goods for the month of October fell by 0.1%, which is less than the 0.4% decrease expected. Core capital goods orders rose by 1.1% in October and economists adjusted the fourth-quarter gross domestic product (GDP) growth rate down in response to the report. Yields held relatively steady in response to the economic data.

"The growth news in today's release was modestly disappointing: real consumer spending increased 0.1% in October, a bit shy of expectations, and September consumption growth was revised down a tenth to 0.5%," said JPMorgan Chief U.S. Economist Michael Feroli. "This leaves real annualized consumption growth in [the fourth quarter of 2017] tracking around 2.5%, down from our prior estimate of 3.0%."

On Friday, the Bureau of Labor Statistics released payroll data reflecting 228,000 jobs had been added in November and the unemployment rate held at 4.1%. A two week spending bill was passed, preventing a government shutdown. Treasury yields fluctuated around 3.7% in early trading Friday.

The 10-year Treasury note yield finished the week of 12/4 at 2.38%, while the 30-year Treasury note yield was 2.78%.

Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, December 7. The report revealed the 15 and 30-year fixed mortgage rates were higher than last week's averages.

The 30-year fixed rate mortgage averaged 3.94% this week. This is an increase from 3.90% a week ago. Last year at this time, the 30-year fixed rate mortgage averaged 4.13%.

This week, the 15-year fixed rate mortgage averaged 3.36%. This is up from last week's average of 3.30%. During this time last year, the 15-year fixed rate mortgage averaged 3.36%.

"This week's survey reflects last week's uptick in long-term interest rates, with the 30-year fixed mortgage rate up 4 basis points to 3.94%," said Len Kiefer Deputy Chief Economist at Freddie Mac. "The 30-year mortgage rate has been bouncing around in a 10 basis point range since September."

Based on published national averages, the money market account finished the week of 12/4 at 0.85%. The 1-year CD finished at 1.67%.